KPMG rocked by defections

KPMG was dealt a double blow by its Big Five rivals last week when it lost FirstGroup plc as an audit client to Deloitte & Touche, and its Canadian practice to Arthur Andersen.

The firm sought to reduce the impact by announcing worldwide restructuring and a counter-offensive aimed at retaining partners in Canada.

UK senior partner Mike Rake suggested the firm’s management in Canada was out of touch with its partners, and said he hoped a significant number would decide to remain with KPMG.

Canadian partners are expected to vote next week on the plan, which was agreed between KPMG Canada chairman Stephen Lanthier and Andersens’ global managing partner Jim Wadia.

The deal marks a major coup for Andersens, which will become Canada’s biggest firm.

Other Big Five firms describe Andersens’ poaching activity as a cynical attempt to destabilise rivals during its slow and painful divorce from Andersen Consulting. Andersens argues that it was trying to boost presence in areas where it lacked critical mass.

The restructuring plan, which Rake said had been in the pipeline since October last year, will merge many of KPMG’s national practices into two giant firms – one for North, Central and South America and one for Europe, the Middle East and Africa, to be known as EMA.

He said the plan was designed to improve the seam-lessness of KPMG’s worldwide service, adding that, although he was disappointed to lose FirstGroup’s audit, consulting work had been awarded to the firm by the transport giant.